Helsinki Q-20101 The impact of globalisation on the EU-system of statistical units ESSnet on profiling MNEs Helsinki, 5 May 2010 Jean Ritzen Statistics

Helsinki Q-2010 1

The impact of globalisation on the EU-system of statistical units

ESSnet on profiling MNEs

Helsinki, 5 May 2010

Jean Ritzen

Statistics Netherlands

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Outline

Introduction

The problem

Purposes of the SU study

GBR as starting point

Direction of solution

Some conclusions

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Preambulary principle

Preambulary principle questions on what do we want to measure regarding MNEs:

- Data on real economic processes of the groups?

- Data on the national administrative organisations of the groups?

(Which taxes in what stage: taxes are component of profit/loss allocation variable)

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The problem

The sum of the parts of a MNE differs from the total

Reasons:

- Each statistical agency collects information using own method, even if the used methods theoretically are harmonised.

- Bottom up approaches do not lead to right totals

- Inconsistencies in data collection and/or data processing

- Insufficient recognition of the real context

ESSnet on profiling large and complex MNEs

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ESSnet on profiling MNEs

Work packages:

A. Feasibility study

B. Methodological issues (e.g. statistical units)

C. Examples and testing

D. Communication and dissemination

E Implementation

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Purposes of SU-study (WP-B)

Purposes of the methodological study on statistical units

- to provide the feasibility study with the methodological underpinning of the statistical units structure of enterprise groups to be used in business statistics and as object of 'profiling'.

- to provide input for the development of the data model and the development of algorithms for delineation of statistical units within enterprise groups in the EGR and national statistical registers. .

- to provide input for the process of adapting Council Regulation (EEC) No 696/93 of 15 March 1993 on the statistical units for the observation and analysis of the production system in the Community

These purposes lead to the provision of an actualised system of well defined statistical units that meets and reflects the needs for adequate profiling of large and complex Multinational Enterprise Groups and thus meet the objectives of the ESSnet.

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Goal: Seeing the whole elephant

Globalisation is an irreversible reality.

Parts of the “elephant” must fit in the whole picture

How to break down the puzzle and built up it again?

Richard Barnabé, 2001; Roundtable

MNE-project report to UN-ECE

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Statistical units

Statistical units are the units to which the statistical figures relate.

Coherent system of statistical units developed, national and international (UN-ISIC, EU-SU-regulation 1993)

EU-statistical units are defined in the Statistical units regulation (early nineties). Introduction of the aspect of autonomy for actors in the economy as the leading criterion (above homogeneity)

Autonomy as criterion is important because of the need of availability of meaningfull relevant real economic information in bookkeeping or reports of units.

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EU-statistical units (1993 regulation)

The main present statistical units are:– The Enterprise Group (EG)– The Enterprise (ENT)– The local unit (LU)

Related to these units, other statistical units are defined, but these are more to be used for analytical purposes and are less appropriate for observation or publication purposes. These units are:

– The Kind of Activity Unit (KAU), as a part of an enterprise– The Local Kind of Activity Unit (LKAU), as a part of a local unit;– The Unit of Homogeneous Production (as a part of an Enterprise or

of a KAU);– The Local Unit of Homogeneous Production (as a part of a local unit

or of a LKAU).– The Institutional unit (IU)

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EU Statistical units: relationships

EG

UHP

IU

Enterprise Legal Unit

KAU

Local KAU Local UHP

Local Unit

Statistical World Administrative World

Source: Peter Struijs

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Statistical units in the BR

In the BR actors in the real economic world must be registered, according EU-BR-regulation. These are:

1. Enterprise group: unit contolling financing processes (Institutional sector code)

2. Enterprise: unit controlling the production processes (SIC-code)

3. Local unit (regional aspects of production processes, SIC-code)

Operationalisation: translation of administrative or organisational units into statistical units, e.g. by profiling (national approach)

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(Domestic) Legal Entity (LeU) (Legal or natural person)

Economic/statistical worldLegal/administrative world

(Domestic)Enterprise group

Local (legal) entity

Enterprise

Local unit

The relationships EG, ENT and LU, 1993

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(Domestic) Legal Entity (LeU) (Legal or natural person)


(Domestic)Enterprise group

Local (legal) person

Enterprise

Local unit

The SBR model (national)

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Fundamental changes in interpretations of unit definitions

- Definition or interpretation of the EG:

Not longer combination of enterprises, but combinationof legal entities which are under common control

- Definition or interpretation of enterprise:

Enterprise is result of top down analysis of EG.

Enterprise as smallest combination of legal units can lead to problems, e.g. with ancillary activities

Issue: Identification of the enterprise unit

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Introduction of the profiling method for large units

Definition of profiling:

Profiling is a method to analyse the legal, operational and accounting structure of an enterprise group at national and world level, in order to establish the statistical units within that group, their links, and the most efficient structures for the collection of statistical data.

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Reasons for international incomparabilities

- the data collection method, including sampling (primary data collection/use of data in administrative registrations)

- the nationally applied definitions of variables

- differences of classification or in the use of classifications

- errors in reporting data

- use of different types of units (e.g. enterprise or local KAU)

- deviating (definitions of) statistical units (e.g. different criteria like that of autonomy)

- deviating methods used in the consolidation of data

- decentralised (national) data compilation at MNEs

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An improved model (global EG --> truncated EG)

Economic/statistical World (global)

Global Enterprise group

Legal entity

Legal/administrative World (global)


Economic/statistical World (sub-global)

National part of Enterprise group(“truncated EG”)

National enterprise

Local unit

Legal/administrative World (sub-global)

Legal or operational unit (sub global)

Local unitlegal or operational

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An improved model (global EG --> truncated EG)



Legal entity



EGR


National part of Enterprise group(“truncated EG”)

National enterprise

Local unit




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An improved model (global EG --> truncated EG), cont

Advantage:

- Co-ordination at EG-level: international tuning

- Full coverage of MNE

- National responsibilities remain

Disadvantage:

- Does not solve consistency problem

Consequence: introduction additional unit, “truncated EG”

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A generalised SBR model (global)

Legal Entity (LeU)

(Legal or natural person)




Global Enterprise

Local unit

EGR

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A generalised SBR (EGR) model (global --> truncated)



Legal entity



Global Enterprise

Local unit

EGR


Truncated Enterprise group

Truncated Enterprise

Local unit


Legal or operational entity (sub global)


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The SBR (EGR) model (global --> truncated)





Legal entity


Global Enterprise

Local unit

EGR


Truncated Enterprise group

Truncated Enterprise

Local unit



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Requirements

- Autonomy (still possible at sub-levels?)

- Identifiability

- Recognition (administrative, operational and statistical)

- Accepted and acceptable (both MNE and statistics)

- Data availability

- Observable

- Meaningful data at all levels (global and sub global) and for the specified uses

Related to the available information systems

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Classifications

- SIC (Standard Industrial Classification), industries

- Institutional classification (IC)

- Classification of changes

SIC and IC lead to homogeneous groups (by industry or institutional)

Institutional classification applies to the Enterprise Group unit

SIC relates to units related to production processes (Ent, KAU, Local Unit)

Firstly the unit should be established, that has to be classified thereafter! Depending on purpose dual or multiple classifications

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SU – special issues

Special issues:

– The subsidiarity principle

– The response burden

– The relationship with other unit systems (ISIC)

Elaboration is dependent on the scope.

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How will subsidiarity be affected?

From strict decentralised (national) to centralised

1. Strict subsidiarity: pure bottom up: existing practise

2. National authorities are responsible but based on harmonised rules and definitions

3. National authorities follow centralised group profile and are responsible for data collection accordingly nationally

4. Centralisation: Agency of country responsible for profile of the group collects data of the whole group and disseminates data to agencies of countries in which the group carries out activities

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Conclusions

- Globalisation leads to the need of adaptation of systems (frames and processes)

- More and more mutual interdependencies- Globalisation goes beyond European boundaries need for tuning different statistical systems (e.g. EU and UN)

- Profiling MNEs requires international communication and co-operation

- Implementation using prototyping approach and gradually

- Revision SU-regulation to be considered

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Thank you for your attention!

Questions?/Discussion

[email protected]

Documents

Helsinki Q-20101 The impact of globalisation on the EU-system of statistical units ESSnet on profiling MNEs Helsinki, 5 May 2010 Jean Ritzen Statistics